• Cash Conversion Cycle
https://store.theartofservice.com/the-cash-conversion-cycle-toolkit.html
Accounts payable
1
Commonly, a supplier will ship a product,
issue an invoice, and collect payment
later, which describes a cash conversion
cycle, a period of time during which the
supplier has already paid for raw materials
but hasn't been paid in return by the final
customer.
https://store.theartofservice.com/the-cash-conversion-cycle-toolkit.html
Corporate finance - Working capital
1
The cash conversion cycle indicates the firm's
ability to convert its resources into cash
https://store.theartofservice.com/the-cash-conversion-cycle-toolkit.html
Corporate finance - Management of working capital
credit terms which will attract
customers, such that any impact on
cash flows and the cash conversion
cycle will be offset by increased
revenue and hence Return on Capital
(or vice versa); see Discounts and
allowances
1
https://store.theartofservice.com/the-cash-conversion-cycle-toolkit.html
Corporate finance - Management of working capital
* 'Short term financing'. Identify the
appropriate source of financing, given the
cash conversion cycle: the inventory is
ideally financed by credit granted by the
supplier; however, it may be necessary to
utilize a bank loan (or overdraft), or to
convert debtors to cash through Factoring
(trade)|factoring.
1
https://store.theartofservice.com/the-cash-conversion-cycle-toolkit.html
Working capital - Decision criteria
1
*One measure of cash flow is provided by
the cash conversion cycle—the net
number of days from the outlay of cash for
raw material to receiving payment from the
customer
https://store.theartofservice.com/the-cash-conversion-cycle-toolkit.html
Working capital - Decision criteria
*Credit policy of the firm: Another
factor affecting working capital
management is credit policy of the firm.
It includes buying of raw material and
selling of finished goods either in cash
or on credit. This affects the cash
conversion cycle.
1
https://store.theartofservice.com/the-cash-conversion-cycle-toolkit.html
Working capital - Management of working capital
*'Debtors management'. Identify the
appropriate Credit (finance)|credit policy,
i.e. credit terms which will attract
customers, such that any impact on cash
flows and the cash conversion cycle will
be offset by increased revenue and hence
Return on Capital (or vice versa); see
Discounts and allowances.
1
https://store.theartofservice.com/the-cash-conversion-cycle-toolkit.html
Working capital - Management of working capital
*'Short term financing'. Identify the
appropriate source of financing, given the
cash conversion cycle: the inventory is
ideally financed by credit granted by the
supplier; however, it may be necessary to
utilize a bank loan (or overdraft), or to
convert debtors to cash through Factoring
(finance)|factoring.
1
https://store.theartofservice.com/the-cash-conversion-cycle-toolkit.html
Cash conversion cycle
1
In management accounting, the 'Cash conversion cycle'
('CCC') measures how long a firm will be deprived of cash
if it increases its investment in resources in order to
expand customer
sales.[http://www.readyratios.com/reference/asset/cash_c
onversion_cycle.html Cash Conversion Cycle (Operating
Cycle)] It is thus a measure of the liquidity risk entailed
by
growth.[http://www.bus.iastate.edu/campcj/fin310/Ch22_L
iquidity_Mngmt_EFS_e3.ppt Cash and Working Capital
Management] However, shortening the CCC creates its
own risks: while a firm could even achieve a negative
CCC by collecting from customers before paying
suppliers, a policy of strict collections and tax payments
is not always sustainable.
https://store.theartofservice.com/the-cash-conversion-cycle-toolkit.html
Cash conversion cycle - Derivation
1
'Cashflows insufficient.' The term Cash
Conversion Cycle refers to the
timespan between a firm's disbursing
and collecting cash. However, the CCC
cannot be directly observed in
cashflows, because these are also
influenced by investment and financing
activities; it must be derived from
Statement of Financial Position data
associated with the firm's operations.
https://store.theartofservice.com/the-cash-conversion-cycle-toolkit.html
Cash conversion cycle - Derivation
1
'Equation describes retailer.' Although
the term cash conversion cycle
technically applies to a firm in any
industry, the equation is generically
formulated to apply specifically to a
retailer. Since a retailer's operations
consist in buying and selling inventory,
the equation models the time between
https://store.theartofservice.com/the-cash-conversion-cycle-toolkit.html
Cash conversion cycle - Derivation
1
*the 'Cash conversion cycle' emerges as interval
C→D (i.e. disbursing cash→collecting cash).
https://store.theartofservice.com/the-cash-conversion-cycle-toolkit.html
Cash conversion cycle - Aims of CCC
Cash flow statement and cash
conversion cycle study will be helpful for
cash flow
analysis.[http://www.aaii.com/compute
rizedinvesting/article/the-cashconversion-cycle.mobile The Cash
Conversion Cycle by CI Staff] The CCC
readings can be compared among
different companies in the same
industry segment to evaluate the quality
of cash
management.[http://www.inventorycur
ve.com/Cash_to_Cash_Cycle.html Cash
to Cash Cycle]
1
https://store.theartofservice.com/the-cash-conversion-cycle-toolkit.html
CCC - Other
1
* Cash conversion cycle,
a business and
accounting concept
https://store.theartofservice.com/the-cash-conversion-cycle-toolkit.html
Drop shipping - Benefits
1
Two significant benefits of drop shipping
are the elimination of upfront inventory
and a positive Cash conversion
cycle|cash-flow cycle. A positive cash
flow cycle occurs because the seller is
paid when the purchase is made. The
seller usually pays the wholesaler using
a credit card or credit terms. Therefore,
there is a period of time in which the
seller has the customer's money, but has
not yet paid the wholesaler.
https://store.theartofservice.com/the-cash-conversion-cycle-toolkit.html
For More Information, Visit:
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m/the-cash-conversion-cycletoolkit.html
The Art of Service
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